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Shopping online is a trend that shows no signs of stopping and in the Finnish markets online sales records will be broken again this year. The increasing consumer traffic brings with it challenges along with the boons: business aspects such as refund processes take up huge amounts of resources in their current state. The situation brings to mind the transitional phase that occurred in the banking industry in the 1990s.

What does the transition mean?

Most of us recall how “going to the bank” actually worked before the era of online banking. Bills were paid either by physically entering the bank or by enclosing them in the bank’s payment service envelopes. The office personnel did the work and fed the billing information into the banking systems so that the due sum was charged from your account on the due date. Shares and stocks were bought and sold, once again, by turning up and setting up the transactions in situ.

Transactions such as share purchase mandates were written in ball-point pen on tracing paper. Then the bank teller took this initial document to another clerk in charge of share commission handling. Only then did the commission make its way to the stockbroker, who finalized the sale at last. The process involved a great deal of expensive manual labor. According to the Federation of Finnish Financial Services, only 2% of Finns made their payments online in the 1990s, while the current figure in 2012 is 81%. The use of electronic identification is 20 times more common than it was ten years ago.

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Statistical information on the payment systems of banks 2002-2011 | Source: Federation of Finnish Financial Services

The Second Wave of E-Commerce: the Transition

Two things in particular make e-commerce possible. The first is, of course, the Internet and its rapid expansion. The second is the aforementioned development of the banking service industry. Trade would not be possible without the availability of electronic payment. Whatever the payment method, it usually necessitates either the handling of a secure transaction proper or identifying oneself electronically (TUPAS identification in Finland).

Online stores these days mostly have their main traits down pat: functionality, range, sound methodology and quick delivery. That is to say, the façade of the online store is impressive. But even if the actual transactions take place online, it does not mean that all of the business stages have been performed: the products need delivering, the customer needs supporting, refunds need receiving and cash backs need managing. Consumers want to cancel or return products, contact customer service or give feedback under the same rules within which they have operated in the first place: twenty-four-seven, and with minimal fuss.

Although the sales people in companies have been replaced by an electronic sales channel, everything that needs to be handled in the event of an exceptional situation is still usually handled in a creaky, old-fashioned, manual manner. And there’s no rest for the wicked, since distance selling always includes an airtight fourteen-day return policy in Finland.

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Managing all of this manual labor is especially taxing when a company’s sales volume rises to thousands of orders per month. In large companies, several members of staff may take part in handling a single refund and the combined work effort grows significantly. The process itself resembles the old way of handling things: the online merchant feeds the information into the system, even though the client could do it himself. The need for more personnel is a constant worry, even though the point of e-commerce is to automate sales and lower their costs. A kind of bottleneck for development and success is created by the effort involved in managing exceptions.

What to do?

The automating and client-centered functionality of online banking can be applied to e-commerce as well. Clients could be offered the opportunity to both order products electronically and electronically inform the merchant about the returns. Online stores only need to verify the refund: machines could handle the client reimbursements and reliably save all stages of the handling process. Thus the need for manual work would become obsolete and businesses would be able to manage their traffic with greater ease. Even in the event of an audit the analysis reports could be delivered to the auditor directly without having to dredge up hand-inputted Excel files — or worse still, old emails and the ruled pages of accounting notebooks.

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